Investing in Obesity

Investing in obesity seems like it ought to be a rewarding proposition. So why is it so messy for so many investors? Are we on the brink of better results for investing in obesity?

So far, the news has been decidedly mixed for people in businesses related to the surge in obesity rates. Food companies whose brands are linked to obesity get only grief. Pepsi and Coke are struggling to shake the bad reputation they’ve gained, as is McDonald’s. Chipotle has deftly crafted a positive image of freshness and sustainability. Despite the fact that chowing down on their calorie-bomb burritos day after day might not help your health and weight, they have avoided the stigma of other fast-food brands.

For people in the business of delivering healthcare services and products associated with obesity, it’s not much better. Running a medical obesity treatment program is an iffy proposition from a financial perspective. Very few such clinics can avoid operating at a loss or doing better than just barely scraping by. Two noteworthy exceptions are the Geisinger Center for Nutrition and Weight Management and the Center for Lifestyle Medicine at Northwestern University. Bariatric surgery is only slightly more viable from a financial perspective.

Likewise, it’s been a struggle for medical device and drug companies trying to invest in innovative obesity treatments. After more than a decade with nothing new in the realm of obesity drug treatments reaching the market, we now have had three new products reach the market in the last two years: Qsymia, Belviq, and Contrave. Qsymia and Belviq have been on the market long enough for the reality of a slow climb in sales to become unmistakable. Contrave reached pharmacy shelves only last week. A fourth new product Saxenda (liragultide) is expected soon. An FDA expert panel recommended approval in September by a lopsided margin of 14-1.

The pathway for new medical devices to treat obesity has been no easier. Adjustable gastric bands (e.g. LAP Band) were first approved in the U.S. in 2001. No other medical devices for obesity have been approved in the U.S. since then. Enteromedics is hoping for approval soon for their Maestro VBLOC system, which survived a close vote in an expert panel hearing this summer. Gastric baloon devices, which are available elsewhere in the world, are coming closer to approval for the U.S. market.

Make no mistake about it, the unmet need for treating obesity is tremendous. Right now, clinicians have very few tools. It’s enough to improve the health and quality of life for a lot of people, but it’s far short of what’s needed. And the progress is slow because of barriers at every turn — a lack of skilled professionals to treat the disease, limited reimbursement, and outright discrimination against people with obesity all get in the way.

Investors are enthusiastic about the potential for new treatments because of enormous unmet need. But those who are looking for a blockbuster overnight are likely to be disappointed. Already, investors in Vivus (Qsymia’s maker) have grown impatient. Obesity treatment is an opportunity that will develop slowly, much like oncology did. Ten years after President Nixon signed the National Cancer Act that marked the beginning of the “war on cancer,” journalists and financial analysts were hyping interferon as a breakthrough for cancer treatment. It never happened that way. Cancer research is still generating deeper insight into this complex collection of diseases. Advances keep coming and various forms of the disease are becoming more and more manageable.

Obesity is likely to be much the same. Scientists presenting their latest insights into the disease at ObesityWeek 2014 are building an ever deeper understanding of obesity. Clinicians are coming to understand that it’s not just a single disease, but a collection of related diseases or different forms of obesity. Cures are not imminent. Don’t count on home-runs in new treatments. Solid hits are coming and will bring us along. Patient investors will be rewarded. People looking to get rich quick should look elsewhere.

Click here to read more from CNBC, here to read more on the prospects for Contrave, and here to read about how the consumer market for weight management is not exactly booming for Weight Watchers.